COLOMBO, June 21 (Reuters) - Sri Lankan shares fell on
Tuesday for a second straight session, a day after Moody's
revised down its outlook on the country's sovereign rating and
as continued foreign outflows and rising interest rates weighed
on investor sentiment.

Investors were also concerned over a government proposal to
reintroduce capital gains tax, brokers said.

Moody's Investors Service on Monday changed Sri Lanka's
outlook to negative from stable, citing further weakening in
some fiscal metrics in an environment of subdued GDP growth,
which could lead to renewed balance of payments pressure.

"Index is moving here and there on low volumes," said
Dimantha Mathew, head of research, First Capital Equities (Pvt)
Ltd.

"Interest rates are moving up. This is the issue, and there
is not much display of interest in the market. Things are not
looking that great."

Turnover stood at 474.9 million rupees ($3.26 million), well
below this year's daily average of around 754.2 million rupees.

On Thursday, the bourse fell 1 percent as concerns over a
government decision to reintroduce capital gains tax kept
investors on the sidelines.

Sri Lanka's cabinet on Wednesday approved a proposal to
reintroduce the tax, especially on land sales, with a cabinet
spokesman saying no decision had been taken on whether the tax
would apply to capital gains in the share market.

Treasury bill yields rose between 1 and 4 basis points at a
weekly auction on Wednesday. They have risen between 6 and 40
basis points since the central bank left the key policy rates
steady on May 20.

The average prime lending rate edged up 24 basis points to
10.47 percent in the week ended June 10. Stockbrokers have said
rising interest rates could be detrimental to risk assets if
they jump beyond 12 percent.